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  • Property prices stabilise further as November declines shrink

Property prices stabilise further as November declines shrink

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November brought another month of easing property price declines across Australia, suggesting a more moderate market ahead. 

CoreLogic's latest report showed the smallest nationwide monthly dip since June as interest rate-related fear subsides, paving the way for a comparatively stable year ahead. 

It all hinges on when rates peak, though. So what's in store for 2023?

National property prices: November 2022

Houses $769,220 Monthly change: -1.2%

Units $597,158 Monthly change: -0.6%

The median Australian home dropped in value by -1.0 per cent in November, representing the mildest decline in nearly six months. 

Once again, it was a mixed bag of results across the capital cities.

MarketMonthQuarterAnnualMedian Value
Combined capitals-1.1%-3.5%-5.2%$778,368
Combined regional-0.9%-3.6%3.3%$578,506

Both Sydney and Melbourne remained unchanged from October's figures, with median prices correcting -1.3 and -0.8 per cent respectively. 

By comparison, peak rates of decline saw Sydney values drop -2.3 per cent in August and Melbourne losing -1.5 per cent in July, so the latest numbers have softened considerably. 

Brisbane, which delayed its downturn by a number of months, recorded another -2.0 per cent reduction, while Adelaide continued to hold strong with a relatively minor -0.3 per cent dip. 

Perth and Darwin prices held more or less flat for another month. Hobart and Canberra, meanwhile, went into the red by -2.0 and -1.2 per cent respectively.

Overall, units continue to outperform houses. Australian unit prices are falling at around half the speed of houses — -0.6 per cent compared to -1.2 per cent in November — as buyers look to more affordable segments of the market. 

While the capitals remained on a steady course, the rate of price declines in the resilient regions shrunk in November, dropping by -0.9 per cent compared to -1.4 per cent in October. 

"Potentially we are seeing the initial uncertainty around buying in a higher interest rate environment wearing off," CoreLogic's research director Tim Lawless said. 

While the market is stabilising, he added that "it’s fair to say housing risk remains skewed to the downside while interest rates are still rising and household balance sheets become more thinly stretched."

'Persistently low' listings are helping to contain price declines

Stock on the market has remained remarkably consistent throughout 2022, and the general shortage is a key reason property values haven't tumbled. 

The CoreLogic report described this year's spring selling season as "mild." New capital city listings in November were -30.8 per cent fewer than they were 12 months ago and remained -14.2 per cent below the five-year average. 

A slow spring for listings means available stock is well below average levels. Source: CoreLogic

With so few new properties coming to market, total available stock has been held -19.3 per cent below the five-year average, representing a real shortage in supply. 

"Across the capitals, total listings haven’t been this low at this time of the year since 2010, and regional listings are at their lowest level since 2007," Mr Lawless explained. 

"This is likely a key factor offsetting the negative impact of higher interest rates and low consumer sentiment."

Sales figures show that buyer demand is also down, though not to the same degree. 

Home sales are sitting slightly below average levels for the spring period. Source: CoreLogic

Currently, home sales across the capital cities are down -1.6 per cent on the five-year average, suggesting that demand is still up relative to supply.

Regional markets are showing resilience

While capital city prices held firm in November, regional corrections shrunk. The combined regions dropped by -0.9 per cent last month compared to a -1.4 per cent decline in October.

MarketMonthQuarterAnnualMedian Value
Regional NSW-1.4%-4.7%1.1%$699,526
Regional VIC-0.8%-3.3%1.2%$566,113
Regional QLD-0.9%-3.5%5.2%$549,485
Regional SA1.0%0.8%18.9%$350,120
Regional WA0.9%1.1%6.4%$414,430
Regional TAS-0.2%-2.5%4.7%$514,822
Combined capitals-1.1%-3.5%-5.2%$778,368
Combined regional-0.9%-3.6%3.3%$578,506

Regional South Australia in particular continues to deliver strong growth, jumping by another +1.0 per cent for the month, while regional Western Australia also received a +0.9 per cent boost. 

Every other state saw a marked improvement on last month's figures, too. As a result, it looks as though the regional market downturn may have turned a corner. 

Regional markets are beginning to experience an upward trend. Source: CoreLogic

PropTrack senior economist Eleanor Creagh told InDaily that "we’ve moved into the next stage of the property cycle faster than some expected," adding that "regional home prices are so far holding up stronger than capital cities."

This is being driven by relative affordability when compared to capital cities, a significant shortage of stock in regional areas, and a persisting "tree change" trend for remote workers.

The market has passed the 'peak fear' stage

The sudden sharp rise in interest rates that began in May had a rapid destabilising effect on the housing market. 

As BuyersBuyers co-founder Pete Wargent explained, the dust is now settling and people are getting on with transacting property. 

"There’s no question that the series of interest rate hikes knocked the stuffing out of the housing market earlier in 2022," he said. 

"That, combined with improved auction clearance rates, indicates that the market is more balanced, especially when it comes to high-quality properties in popular areas."

With the Reserve Bank opting to increase the cash rate by a smaller 0.25 per cent over the past two months, it's becoming clearer that the peak of the tightening cycle is in sight. 

"After months of gloomy headlines, eventually consumers tend to tire of hearing the same old messages and move on, particularly in the absence of a major property price correction, and a lot of buyers are doing just that now," Mr Wargent said. 

"At some point, you just have to choose to get into the market."

What's next for the Australian property market?

As 2023 approaches, interest rates remain the critical factor that will define the next steps for Australia's housing market. 

After a string of 0.5 per cent cash rate hikes, the RBA shifted to 0.25 per cent increases in October and November, indicating that we should be approaching the peak of the tightening cycle. As it stands, the cash rate is now at 2.85 per cent. 

Mr Lawless cautioned that, "if interest rates move materially beyond 3.1 per cent, it is reasonable to expect a more substantial rise in mortgage distress, especially when considering the high cost of living pressures."

A strong economy historically low unemployment, however, "will be the key safety net helping to keep a lid on defaults," and many Australians are ahead on mortgage repayments with substantial savings as a buffer. 

CoreLogic deems a surge in distressed sales to be unlikely. As a result, the persistent shortage of stock on the market should continue to hold off any "reacceleration" in the market downturn. 

A range of possible scenarios proposed by SQM Research suggest that 2023 could bring anything from double-digit price growth to further declines up to 6 per cent. 

These outcomes are entirely dependent on where the cash rate comes to rest, so all eyes will be on the Reserve Bank as the new year begins to unfold.